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Rackspace's shares plummeted as AWS gained market

In 2014, Rackspace hired Morgan Stanley seeking strategic options, including a partnership with other tech companies.

Google was also competing with AWS and slashed its cloud-computing prices by 85% in Mar'14.

The AWS-Google price war continued (continues today) while smaller players like Rackspace struggled to match low prices.

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27 Aug 2016

Succumbing to cloud rivals, Rackspace goes private in an acquisition

Cloud computing company Rackspace has announced that it has entered into a $4.3 billion cash deal with Apollo Global Management to become a private company.

According to Apollo, it would acquire Rackspace for $32 per each share in cash.

That would be a 38% premium to the cloud company's closing price on 3 Aug'16 and 6% above its stock closing price on 25 Aug'16.

A significant opportunity

Rackspace President & CEO Taylor Rhodes stated, "We are presented with a significant opportunity today as mainstream companies move their computing out of corporate data centers and into multi-cloud models."

Apollo-Rackspace deal

Deal is subject to regulatory approval

The Apollo-Rackspace deal is, however, subject to antitrust regulatory approval in the US, the European Union, and Israel.

Rackspace's board has unanimously approved the deal, which is expected to be closed in the last quarter of 2016.

The deal is being financed by Citigroup, Barclays, Deutsche Bank and Royal Bank of Canada.

Great respect for Rackspace, says Apollo

David Sambur, Partner at Apollo Global Management, stated, "We have great respect for the company's (Rackspace) talented employees and their commitment to deliver expertise and exceptional service for the world's leading cloud platforms."

Contract

Rackspace considered several options before going private

Under the contract, the funds managed by Searchlight Capital Partners would make an equity investment in the acquired company.

Rackspace's board of directors having unanimously approved the deal recommended the stockholders vote in favor of the transaction.

The board considered several options, including continuing as a public trading firm, before going private.